Many residents in rural America would have reduced access to mortgage credit from community bankers despite a rural lender qualified mortgage exemption on balloon-payment mortgages included in rules finalized by the Consumer Financial Protection Bureau.

The Independent Community Bankers of America's Community Bank Qualified Mortgage Survey, released Thursday, reported that community banks in rural communities often make non-traditional loans such as balloon mortgages. The loans are not eligible to be sold into the secondary market, so they are kept on the bank's books, giving community banks a vested interest in the loans and allowing them to work out a solution if repayment problems arise.

While balloon loans made by small creditors that operate predominantly in rural or underserved areas are deemed to be qualified mortgages under the CFPB mortgage rules, the bureau's definition of rural is too narrow, leaving out too many communities and unnecessarily cutting off access to credit, the ICBA has argued.